State budget appears resolved

STATE HOUSE, BOSTON, JUNE 25, 2013….House and Senate leaders struck a deal on Tuesday night to raise taxes by $500 million to fund short and long-term investments in the state’s aging highway and transit system, directing enough new revenue to the MBTA to forestall immediate fare increases and providing what lawmakers consider to be enough new funding to facilitate future expansion projects.

The House and Senate could vote on the bill as early as Wednesday when both branches will be in session.

The conference committee proposal, which is not be subject to amendment from lawmakers, would raise the gas tax by 3 cents a gallon and tie future increases to inflation. The per-pack tax on cigarettes would increase by $1, and lawmakers hope to collect $161 million by applying the state’s 6.25 percent sales tax to computer system design services, and $83 million from changes to the utility classification and sales sourcing for tax reporting.

The bill would require the Massachusetts Department of Transportation to come up with plans to toll additional roads, including border tolls, and appropriate $100,000 for an advisory council to help MassDOT develop a statewide asset management system.

Legislative leaders believe the plan will provide enough additional financial support to shore up the MBTA and MassDOT operations in the near-term, while also allowing for projects like the Green Line extension to Medford and South Coast rail to move forward.

Though the tax on software services was included in both the House and Senate bills and not subject to the most recent negotiations, Massachusetts Taxpayers Foundation President Michael Widmer blasted its inclusion in the bill, suggesting lawmakers have failed to grasp it full impact.

“State leaders could hardly have chosen a more perfect tax to undercut the future of the Massachusetts economy. This is the most sweeping computer and software services tax in the nation. It strikes at the heart of the state’s innovation economy and will stifle job creation for years to come,” Widmer told the News Service.

He estimated software design businesses will pay as much as $500 million in new taxes under the deal, far more than the $160 million lawmakers are expecting.

House Ways and Means Chair Brian Dempsey and Senate Ways and Means Chair Stephen Brewer were not available to comment on the accord, but the contours of the plan mirror those presented by House Speaker Robert DeLeo and Senate President Therese Murray in April, according to a summary obtained by the News Service.

The six-member conference committee – tasked with negotiating a compromise between the previously passed House and Senate versions of the bill – also accepted Senate-backed provisions that would direct up to $805 million in additional state spending to transportation needs by 2018. The concession from the House could help mitigate a threat from Gov. Deval Patrick to veto the bill if it insufficiently funded transportation.

To reach the higher new spending level on transportation, the House agreed to Senate-approved measures to sweep the underground storage tank removal fund of surplus revenues collected through a 2.5 cent per gallon surcharge on gas, and to require utilities to pay the state the fair market value for the use of rights-of-way on highways where they own infrastructure, such as poles.

The bill was filed in time Tuesday night to allow consideration of the bill on Wednesday without suspending legislative rules aimed at fostering transparency and time for lawmakers to review bills before voting on them. Dempsey, Brewer, Sen. Thomas McGee and Rep. William Straus all signed off on the agreement, while the Republican conferees Sen. Robert Hedlund and Rep. Steven Howitt did not sign the bill.

Gov. Patrick called the House bill a “pretend fix” to the state’s infrastructure problems when it passed in April and threatened to veto the measure if it got to his desk. He softened to the Senate’s version, however, and said last week on the radio he expects to be able to sign a law that approached $800 million in new transportation spending.

Patrick is in California visiting his daughter and new grandson, and his office did not have an immediate comment on the compromise.
The House and Senate tax bills (H 3415/S 1770) were sent to conference committee on April 22 after the House tax bill passed 97-55. The Senate bill was approved 30-5.

The conference committee bill would also close the budget gap at the T in fiscal 2014, avoiding the need for a second year of fare increases and service cuts, and envisions moving all MassDOT employees off the capital budget over three years.

Regional transit authorities would be forward funded starting in 2014 under the proposal. MassDOT and the MBTA would be required to generate their own new revenue sources and savings over the life of the five-year plan to meet spending expectations.

The Patrick administration, which proposed as much as a $1 billion in new transportation revenue and spending in its budget, has questioned whether multiple major transportation funding goals can be accomplished with less new revenue, and has even held up $150 million in local road funding as it waits to review the compromise bill.

Osler ”Pete” Peterson

Medfield Selectman

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